Institutional investor?

thematic equities

Digital disruption: driverless technology

February 2017

Share this article

From driverless cars to delivery drones, autonomous vehicle technology is becoming a reality – opening up new investment opportunities.

In the 1980s hit TV series “Knight Rider”, jet-black KITT offered a tempting vision of a car of the future – fully self-driving, and complete with a mind-boggling array of features including a turbo boost, a medical scanner, a lie detector and even a dry sense of humour.

Three decades later, sentient vehicles are still firmly in the realm of science fiction, but self-driving ones are within reach. The scenario presented in “I, Robot” – where Will Smith enjoys a nap as his silver Audi RSQ speeds seamlessly down the highway, before taking control of a steering wheel which emerges out of the dashboard – may now be mere years away from reality. Driverless buses and autonomous long-distance lorries aren’t far behind.

Consultancy McKinsey forecasts that up to 15 per cent of passenger vehicles sold globally in 2030 will be fully autonomous cars, while revenues in the automotive sector could nearly double to USD6.7 trillion thanks to shared mobility (car-sharing, e-hailing) and data connectivity services (including apps and car software upgrades).1

race to the driverless car

Key milestones from the past year

Source: Pictet Asset Management

New players such as Tesla Motors, tech giants from Google to Microsoft2 and a host of start-ups are competing against – and often working with – traditional manufactures like Ford, General Motors and Nissan to make such predictions into reality.

Safety first

Even if technology, regulation barriers and ethical dilemmas delay the commercial-scale launch of fully driverless cars beyond 2020, partial automation is already on the way with the introduction and ongoing refinement of advanced driver assistance systems (ADAS).3 This market alone is expected to grow to USD34 billion by 2020 – representing a compound annual growth rate of 40 per cent – as the global penetration rate triples to 48 per cent.4

One key area for technological improvement – and thus potential investment opportunities – is security. In the United States alone, the National Highway Traffic Safety Administration (NHTSA) estimates that motor vehicle crashes cost the economy almost USD1 trillion a year, including the loss of productivity. Top causes of accidents include people getting distracted or drowsy, driving under the influence, speeding and not wearing seatbelts. As human beings we are clearly fallible, and one way to improve safety could be to give greater control to technology.

Swedish manufacturer of car safety gear, Autoliv5, estimates that its products – which include a wide range of driver assist radars and an infrared night vision system alongside improved airbag and seatbelt technology – help save 30,000 lives a year and prevent 10 times as many injuries.

Talking cars

While your car is unlikely to start telling you jokes, as KITT does to Michael Knight, it may well soon be able to recognise your voice or gestures, and to “talk” to other vehicles and even to emergency services.

Cars could soon warn each other about traffic jams or dangerous road conditions, as well as communicating with bridges and traffic lights.
–

The 2017 top-of-the-range cars from Cadillac and Mercedes-Benz are some of the first to include vehicle-to-vehicle (V2V) communication technology. At its simplest level, V2V will enable cars to share their position, speed, steering-wheel position and brake status with each other to help spot incoming vehicles and reduce the likelihood of crashes. Taken to the next level, cars could warn each other about traffic jams and dangerous road conditions, as well as “communicating” with bridges and traffic lights.

An eCall feature – set to be mandatory for all new car in Europe from April 2018 – will automatically contact the emergency services in case of a serious accident, communicating the location of the vehicle and other details. This measure alone is expected to save more than 1,000 lives per year.

Robots in charge?

The latest automotive technology is already deeply rooted in the world of robotics and artificial intelligence. The machine-vision systems developed by Israeli driving assistant software maker Mobileye6, for example, have been trained to identify pedestrians, monitor blind spots and decode traffic signs.

France’s Valeo6, meanwhile, is working on a new generation parking system which will enable drivers to leave the car and then use a smartphone to instruct the vehicle to park itself. In the drone world, Amazon7 is one of several companies currently carrying out testing of light unmanned craft, with the eventual intention of offering customers automated deliveries within just 30 minutes.

The autonomous vehicle (AV) revolution is also spreading to the skies with the development of drones for the delivery of everything from parcels to organ transports, monitoring crop growth, mapping and photographing hard to reach areas and more.

the flying av

Dawn of the drones

Source: Pictet Asset Management

Beyond transportation, robotic AVs are finding application in the industrial world. Online retail giant Amazon, for example, uses bright-orange autonomous robots to move goods and parcels around its warehouses. Hospitals, meanwhile, are embracing a breed of mobile machines to transport lab specimens, medicine and other supplies, and another one which can sterilise rooms by killing germs with blasts of light. In the energy sector, remotely operated underwater vehicles (ROVs) can go out in conditions which are too rough or water which are too deep for humans to inspect pipelines and drilling platforms.

There are, of course, still many hurdles to overcome. For fully automated cars – which do not need a driver – these include yet-to-be-developed technology, winning public trust for an essentially new mode of transportation and the need for new rules and regulations on everything from the highway code to car insurance.

For drones, developers need to resolve issues over battery life and find a way to safely coexist with all the other flying objects and beings in the sky.

Over time, though, the trend is clearly for robots to take on greater and greater control of our roads and skies. For investors, this is an opportunity to get behind the wheel of change sweeping through the transportation industry.

[1] Automotive revolution – perspective towards 2030
[2]Tesla, Google and Microsoft are part of Pictet Digital and / or Pictet Robotics investable universes
[3] Transportation safety is a sub-segment of Pictet Security and represented 10% of the fund as of 30.11.2016
[4] CLSA, September 2015
[5] Autoliv is part of Pictet Security investable universe
[6] Mobileye and Valeo are part of Pictet Security and / or Pictet Robotics
[7] Amazon is part of Pictet Digital investable universe

This marketing document is issued by Pictet Asset Management. It is neither directed to, nor intended for distribution or use by any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, the KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet.

This document is used for informational purposes only and does not constitute, on Pictet Asset Management part, an offer to buy or sell solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. The effective evolution of the economic variables and values of the financial markets could be significantly different from the indications communicated in this document.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.

The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.

Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.

Hong Kong: this material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.

Singapore: this material is issued by Pictet Asset Management (Singapore) Pte Ltd. This material is intended only for institutional and accredited investors and it has not been reviewed by the Monetary Authority of Singapore.

For Australian investors, Pictet Asset Management Limited (ARBN 121 228 957) is exempt from the requirement to hold an Australian financial services license, under the Corporations Act 2001.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

In Canada Pictet AM Inc. is registered as Portfolio Manager authorised to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.

London

Pictet Asset Management 2016 All rights reserved. Please read our terms and conditionsbefore accessing this website.
Some of the photographs published on this website have been taken by Stéphane Couturier, Magnus Arrevad, Lundi 13, Phovea, 13Photo, Magnum Photos, Club Photo Pictet.

Your regional office

London

This website uses cookies to enhance user navigation and to collect statistical data. To refuse the use of cookies, change your settings or for more information, please click on the following link: Cookies policy. By continuing to browse this website, you accept the use of cookies for the above purposes.